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Starbucks has reported a mixed financial performance for its third quarter (Q3) ended 30 June 2024.
Despite facing global sales challenges, the company’s operational improvements have helped maintain profitability.
The company posted consolidated net revenues of $9.1bn for the period, marking a 1% year-over-year (YoY) decline but a 1% increase in constant currency.
Compared to Q2, revenues were up 6%.
Starbucks reported generally accepted accounting principles (GAAP) and non-GAAP earnings per share of $0.93, a 6% and 7% decrease YoY, respectively.
Segment performance
North America: Revenues increased 1% to $6.8bn, driven by a 5% increase in new company-operated stores and growth in licensed stores.
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By GlobalDataHowever, comparable store sales declined 2%, with a 6% drop in transactions offset by a 3% rise in average ticket value.
Operating income decreased to $1.4bn, with an operating margin contraction to 21.0% from 21.7% due to higher wages, benefits, and promotional activities.
International: Revenues fell 7% to $1.8bn, impacted by a 5% negative currency translation and a 7% drop in comparable store sales.
In China, sales plunged 14%, driven by a 7% decline in both average ticket value and transactions.
Operating income decreased to $287.5m, with operating margins contracting to 15.6% from 19.0%.
Channel development: Revenues declined 2% to $438.3m, primarily due to stock-keeping unit optimisation and the sale of Seattle’s Best Coffee brand.
This was partly offset by increased ready-to-drink revenue.
Operating income rose to $235.2m, with an improved margin of 53.7% from 46.3%, driven by a favourable sales mix and lower product costs.
Operational highlights
Starbucks opened 526 new stores during the quarter, bringing its total to 39,477 globally, with 52% company-operated and 48% licensed.
Its US and China locations comprise 61% of this portfolio.
The Starbucks Rewards programme in the US saw a 7% YoY increase in active members, reaching 33.8 million.
Challenges and outlook
Starbucks continues to navigate a challenging market environment with cautious consumer spending in its primary markets, the US and China.
Despite these hurdles, CFO Rachel Ruggeri noted that efficiency efforts are progressing ahead of expectations, helping to offset investments needed in the current consumer climate.
Starbucks reaffirmed its financial year 2024 guidance, expecting global and US comparable sales to range from a low single-digit decline to flat, with annual profit growth in the flat to low single-digit range.
Overall, Starbucks remains focused on operational efficiencies and strategic investments to navigate the current macroeconomic challenges and drive future growth.